Alternergy preparing for REIT spin-off

Alternergy [ALTER 0.94, up 2.2%; 81% avgVol] [link] is contemplating the formation of a REIT to “raise additional capital for the group”. The company said that it is considering using its subsidiary, Triple Play Land Corp (3PLCo), as “a platform” for this future REIT offering and has restructured its asset holdings to consolidate “all of the real estate needs of all its project companies” under 3PLCo.

MB bottom-line:  While the company has not (to my knowledge) provided an exact timeline for when this REIT listing could happen, I think my coverage of ALTER’s BDO TradeTalk (MB link) makes it likely that this could be a part of the company’s fundraising plans for development of its pipeline beyond its “500 MW by 2026” goal. As ALTER explained, it’s already nearly 70% of the way to achieving that goal, but it has a management team with a lot of investment banking experience that is looking to “reach far more than that” in the years to come. We know nothing of how this REIT would operate, but I imagine that it would be set up to collect lease payments from ALTER’s power plant organizations for the use of the land (similar to CREIT and PREIT). We don’t know if the REIT would hold the land itself or long-term leaseholds, or if there will be any kind of dynamic mechanism like CREIT uses to do a bit of profit-sharing with REIT shareholders in addition to the basic leasehold revenue. The timing checks out as REIT valuations will only increase as interest rates fall. I’m interested, but I’m going to watch ALTER to see how closely it integrates this REIT into its long-term development plans. 

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